Category Archives: Best Practices

Source-to-Pay+ is Extensive (P1) … Where Do You Start???

Even though all core sourcing and procurement technologies have been available for twenty (20) years (although it is debatable just how good the initial versions of many of these applications were), there are still many mid-size or larger organizations that don’t have any modern applications to support Procurement, and the majority of organizations still do not have what any modern analyst would consider reasonable support for the full, core, source-to-pay process.

Given that inflation is back with a vengeance, anticipated savings is leaking faster than a bald spigot (see last Friday’s rant), and most organizations are in a cash crunch as a result of down sales during the pandemic (and now due to a lack of core inventory to sell), they need to update their procurement tech stack fast.

But they can’t do it all at once. Even if your organization selected a SaaS suite platform where the provider can enable a full end-to-end solution with the flip of a software switch, your organization still can’t do it all at once. Why?

1) these applications don’t work without data … and they don’t work well without LOTS of data … most of which is either historical data, which has to be located, cleansed, transformed, and enriched … or supplier / market data, which has to be requested, collected, verified, transformed, and loaded

2) these applications don’t deliver without user training … and I don’t care how much “AI” is included, how “autonomous” the vendor claims they are, or how “intuitive” the UI is supposed to be … everything’s obvious to an expert (who designed the system), but nothing is guaranteed to be obvious to someone without the same education and experience in Procurement and Technology

3) you need value out of the gate to justify the purchase and the continual license fees (SaaS isn’t about utility, it’s about being a utility which locks you in for life)

4) your users need to see results for them to want to continue using it, which is key for not only value out of the gate but value over time

So the reality is, even if you decide to go for a suite solution, you should implement it piecemeal over time (on a realistic schedule), as well as ensure that you don’t start paying for anything you can’t realistically use until you can start using it regularly and with value.

But where do you start?

Upstream? Here you have, at a minimum:

  • Strategic Sourcing, which can include RFP, e-Auctions, and hybrid multi-round events, with and without strategic sourcing decision optimization
  • Spend Analysis, where you can analyze your spend and find opportunities to address
  • Supplier X [Information / Relationship / Performance / Risk / etc.] Management, where you keep track of, interact with, manage, collaborate with, or eliminate suppliers
  • Contract [Lifecycle] Management, which can, depending on what you get, help you negotiate, create, analyze, and manage contracts

Downstream? Here you have, at a minimum:

  • Catalog Management / e-Procurement which allows your employees and buyers to order what they need, when they need it, off of contracts or pre-negotiated price sheets
  • Invoice and Order Management, which allows you to track your orders, manage your invoices, ensure you get the appropriate reviews and approvals, and make sure you get the right OK-to-Pay
  • e-Payment, which ensures the inventory/service is received, the appropriate ok-to-pay(s) has(/have) been received, the payment is appropriately scheduled, and made at the appropriate time and generally manages your AP from a Procurement perspective

Cross-stream? Here you have, at a minimum:

  • Risk Management, which allows you to track supplier, carrier, and other risks that could prevent you getting your stuff or getting it to your customer
  • GHG/Carbon Tracking, which allows you to be compliant with (coming) reporting requirements, and supports Scope 1/2/3 as appropriate
  • Inventory Management, especially in direct where you are doing build-to-order and need to ensure that product doesn’t get released just because it’s in stock (when it is part of an urgent build waiting on another product for a customer that ordered three months before anyone else);

Not an easy decision, eh? So where do you start? Stay tuned for Part II .

How Resilient is Your Supplier Management?

Given that the state of most supply chains is still chaos, and may be for quite some time, if you don’t know, maybe you should find out!

How? Benchmark your current supplier management performance against more than 800 global organizations that participated in the 2022 State of Flux Supplier Management survey at this link (and receive a free maturity benchmark analysis for your organization).

The reality is that supplier resilience, the foundation for supply chain resilience, is becoming more important than just about any other kind of resilience as a business without the products to sell or operate is not a business, and if its suppliers are not resilient, it won’t have any sources of supply … and will not be able to operate.

That’s why, once a an organization has implemented an e-Procurement core and a sourcing core, if it has any supply issues, it should tackle SRM as soon as possible in wave 2 (and this can be done simultaneous with implementing the analytics core — after all, it’s good to have supplier data to crunch on). Plus, SRM supports end-to-end source-to-pay processes when done right, as explained in the State of Flux research publication front-material that brings you best practices from over a decade of research.

The research report, which reviews their six pillars of supplier management:

  • Value
  • Engagement
  • Governance
  • People
  • Technology
  • Collaboration

Also provides you with a four-phase action plan to guide you through your four-phase supplier management journey. At a high level, the journey is to:

  1. Explore the opportunity … with a value opportunity diagnostic
  2. Create the business case … by fleshing out the value proposition
  3. Setup and run … with supplier management in real time
  4. Scale and grow … and achieve ROI

And this is something you want to do as leaders significantly outperform on each of the pillars even compared to “fast followers” …

In a later post we’ll dive into a few of the findings, but for now, if you’re having problems (and you are), and you’re not sure how well you’re doing against peers, take the benchmark, download the report, and start planning for supplier development — even if you aren’t ready to implement a custom solution as all P2P or e-Sourcing platforms can support the basics of supplier management, and the reality is a platform isn’t a solution without a process and trained people to follow it. (And keep your eyes peeled for the State of Flux 2023 research survey which will be launching soon … responding early gets you the results early, and leaders in this space are in the best position to win!)

How Can Indirect Spend *NOT* Be Well Managed in 2023?

the doctor gets a lot of press releases. Some of them contain a lot of BS (which is good, he writes best when he’s on an angry rant), others contain a lot of “findings” that, if true (and the findings usually are for the right for the right subset of the market), are simultaneously scary and ridiculous. In this particular case, as the doctor writes this, he received a press release that said the research finds that 82%+ of procurement leaders say their indirect spend is not well managed, leaving substantial cost savings on the table.

The question is, how is that number so high? We’ve had source-to-pay suites for a decade (which were originally designed to source indirect products and services, create catalogs of those sourced selections, support purchase orders only for items in the catalogs, and ensure invoices matched the item prices in the catalog. And for those willing to do custom integration, it was possible to integrate a best of breed sourcing solution and a best of breed catalog management solution and a best of breed e-invoicing solution and achieve this in the late 2000s.

Now, in a mixed solution, there was no guarantee that the sourcing event would choose the best mix (since early solutions generally didn’t support optimization or advanced analytics), that the catalog would force the lowest cost (or even preferred) selection when there were multiple options, or that the invoice management could detect when shipping costs were too high or handling fees shouldn’t be there, but there was still management and any overruns were not substantial (at least compared to pre-solution overages in indirect; an organization could easily cut out 80% of the fat, which could be as high as 30% in some categories; so if the overage went from 30% to 6%, that was well managed — and solutions have only become better over time).

What’s even worse is when the expected reality is put into hard numbers. According to the press release “two-thirds of suppliers (68%) report increased demand for their offerings compared to the past year and nearly half (43%) are planning to increase prices in 2023“. Thanks to global inflation, prices are going up as demand does (which is still pent-up post-pandemic), and we know it, but knowing costs will be uncontrollable to an extent is a tough one.

Of course the press release says that the key to cutting cost is to implement (autonomous) technology that saves on day one, which you should know by now, but the question is why have so many companies not yet implemented basic S2P functionality, either as a suite or as BoB integrations, as such technology would have ensured indirect was well under control, and reduced a likely organizational overspend by (85% of 15% of 35% =) 5% (est. realization * avg. savings * avg. indirect spend) of total spend, which would go straight to the bottom line! No autonomous tech needed!

For those interested, the press release came from a third party PR firm and was based on Globality’s “2023 Research Insights for CFOs”.

It’s not the Analyst Firm. It’s the Analyst!

In our post on Friday that asked How relevant is the Analyst Firm?, we noted that, these days, I’m hearing far too often from new companies or smaller companies that weren’t acquired in the M&A mania that their [marketing] strategy is to “get on Analyst Firm Map XYZ” or “get in front of the big analyst firms as fast as possible and, hopefully get written up“.

And this scares me because,

1) as pointed out in our last post, they think “the firm” is the answer, when, in fact, it’s not the firm but the analyst because “the firm” will only get it right IF the analyst gets it right (and, if you get a junior analyst, you may find that they over-promote a competitor with great marketing and misleading AI claims but limited capability over a unique solution you offer that, due to the subtlety of the power at the solution core, the analyst isn’t able to grasp what he’s unable to see)

2) for an analyst to get it right, that analyst needs, at least, a dozen skill sets that, combined, require
a) an education that sometimes goes beyond an average PhD and includes
i) the equivalent of a bachelor’s in mathematics
ii) the equivalent of a bachelor’s in computer science or engineering
iii) the equivalent of a Master’s in Procurement or Supply Chain or
Advanced Operations Management (a Bachelor’s in business ain’t enough)
b) at least a decade of experience in the space to understand the breadth of technology, industries, and current capabilities
c) exceptional analytical skills (and questioning skills)
d) great writing skills (in a day where it seems no one can write anything without AI, but AI is only as good as the content sources fed into it, and those raw sources have to come from … that’s right … a human!!!)

3) the number of senior analysts we’ve had with the right education and experience has always been few and far between (with even the biggest firms never having more senior analysts in our space than you can count on the fingers of one hand at any one time), but with the departures / retirements of the majority of the best analysts in our space from Gartner, Forrester, and Hackett*2 over the last few years, and almost half of the senior analysts from Spend Matters …

that’s not leaving many senior analysts, or viable analyst firms, left, and, at least in the doctor‘s view, all of the firms except Spend Matters have been gutted*3 in our space at least once over the last few years, and, given the breadth and depth of requirements to be a good analyst, where’s the next generation of senior analysts going to come from?

[Unless another visionary in our space with a strong tech background, a couple of decades of domain experience, and great analytical and writing skills is willing to jump the fence to the analyst side, we’re not going to be getting many new senior analysts that we can rely on. They’re not at other analyst firms (outside our space), they’re not at consultancies, and the reality is that there’s only a handful of visionaries left that didn’t make their millions and retire already or who are still thrilled by the space and want to stay in it as long as possible.]

It wouldn’t be unrealistic to say that Bertrand Maltaverne could be the last great analyst in our space.

In other words, if you want to be sure you’re getting the right coverage, review, or feedback, you need to STOP assuming the analyst firm is the answer and start looking at the analyst inside, or outside, that firm (and further remember that many of the senior analysts who are still in the game are on our own for various reasons), find the right analyst for you, and make sure you get in front of that analyst (or don’t bother with the firm at all). And you need to further realize that it’s not possible for every analyst to be an expert in every technology in the Source to Pay space. You need the right review and guidance from the right senior analyst, or the end result is that it will be worse than no review and guidance at all.

 

*2 but, in fairness, we will point out that Gartner and Forrester have been aggressively working on replacing them, although this has often required poaching from other peer firms, so the number of senior analysts hasn’t increased by much 🙁

*3 one has to remember that, in addition to vendor poaching, there was M&A in the analyst space too, and this wasn’t always for the better! Especially when the acquirer worked to a beat or a model that was different then the acquired firm that itself was only successful because it was different and had the right people who worked well under their own unique beat or model.

In Source-to-Pay, How relevant is the Analyst Firm?

As a result of the M&A mania in the late teens (during the era of [mega] suite consolidation) and very early twenties (during the pandemic when all of the PE firms suddenly realized that e-Sourcing, e-Procurement and, most importantly, e-Payment solutions were critical [when no one could go into the office]), a lot of known smaller, and even mid-size, players were swallowed up, leaving a vacuum at the lower end of the market.

As a result, two things have happened:

* a slew of new players (run by leaders new to the market) have entered the market; and while most have very limited solution breadth or depth, their use of modern technology is plugging a hole and offering value out of the gate (especially to smaller companies with nothing)

* a lack of talent (which has also been swallowed up into larger companies) at the remaining offerings has resulted in many of the leaders in these companies coming from other areas of enterprise software

… and neither of these sets of players have a deep understanding of our market or the analyst firms in it and too often I’m hearing that part of the strategy is “get on the Gartner Map“, “get on the Forrester Map“, or “get on the Spend Matters Map“. And while the last map*0 is the map you definitely want to be on at some point (as it actually focusses on technology vs. a mix of soft vs. hard factors that make it hard to judge how technically relevant the solution on its own is for you), “getting on the map” isn’t a strategy.

As a corollary, I’m also hearing too often that a big part of the marketing strategy is to “get in front of the big analyst firms as fast as possible and, hopefully get written up“, and if there are analyst relations, all their time is focussed on these big firms. And that worries me. A lot!

Why? Because they think “the firm” is the answer, when, in fact, it’s not the firm but the analyst because “the firm” will only get it right IF the analyst gets it right. And at many of these firms, I’m more worried by the year if the analyst will get it at all. Why?

If we go back to Saturday’s post on AI: Applied Indirection, Artificial Idiocy, & Automated Incompetence, we have the dual problem that most of the solutions out there are claiming capabilities they don’t have and even most people in technology can’t judge whether or not the claims are real or fake, and this goes for analysts too. Especially new, junior, analysts without the right tech background, domain understanding, education*1 and experience in our space.

The reality is that we’ve went from the point where, in the beginning, to be a good analyst you needed to:

* understand the space
* understand the unique processes the technology has to support to serve the space
* understand the current breadth of offerings and capabilities across the vendor landscape

to where, to be a good analyst as technology progressed, you also needed to

* understand the different technology stacks and what they can, and cannot, offer
* understand the different technology options and what they can and cannot do (i.e. algorithms, workflows, etc.)
* understand the nuances of buyer needs across industries and niches (e.g. direct vs indirect, manufacturing vs. distribution, F&B vs CPG, etc.)

to today where, to be a good analyst, you also need to

* understand the different technologies that are used in ML/AI and what actually qualifies as ML/AI and what does not
* understand where advanced technologies, especially those based in ML/AI, are required, and where classic techniques will do just as well, or better
* understand the different levels of analytics, and whether a solution has real analytics, or just pre-packaged reporting
* understand how the different technologies on the market need to link together as we move from the world of suites to platforms

In other words, we’ve gone from the point where to be an analyst, in the beginning, you just needed:

* critical thinking skills
* a basic business understanding
* good writing skills

to where, as technology progressed, you also needed:

* a basic understanding of technology (2 years of computer science or equivalent STEM offering in engineering, physics, etc.) and scientific thinking
* a basic understanding of source-to-pay and related processes across industries and category uniqueness that may or may not dictate different needs
* a basic understanding of integration points to other enterprise systems
* a good domain understanding of the Sourcing/Procurement needs in modern multi-nationals

to where, looking at technology today, you also need:

* a deep understanding of math and analytics (and at least a Bachelor’s in a STEM area)
* a deep understanding of models and metrics and where, and how, all the different data sources integrate for risk, diversity, spend, and opportunity models
* a deep understanding of what’s needed for a modern data interchange, API integration, and procurement management platform
* a deep understanding of how procurement works with and supports supply chain, logistics, and finance and how the pieces support this
* a good bullsh!t detector and the ability to dive into claims that a company may want you to take without question and find out what really is there and what the claim really means
* at least a decade of experience on top of close to a decade of education (because if you’re not a genius, you probably need at least a Master’s or two Bachelor degrees to get all the background you need) to put it all together

But who has that anymore? And where are they?

To be continued … in Part II

 

*0 as of posting as those maps, V3, were designed as pure-tech [and the last iteration co-designed by the doctor]

*1 most programs, if they teach anything at all, teach classical operations management or logistics, neither of which is modern procurement or supply chain management, and definitely not advanced math or algorithms!